The new tax structure

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The new tax structure

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May 03, 2005 09:31 IST

Finance Minister P Chidambaram on Monday retained both his controversial tax proposal -- the fringe benefit tax and the cash withdrawal tax -- but made modifications to offer some relief to individuals as well as corporates.

While retaining the fringe benefit tax rate at 30 per cent, Chidambaram reduced the taxable value under six categories including entertainment and hospitality from 50 per cent to 20 per cent.

Let's take look at the new tax structure.

The New Tax Order
% of expense under the fringe benefit tax
	Earlier	Now
Use of telephone (other than leased lines)	10%	20%
Entertainment	50%	20%
Scholarship to children of employees	Actual	50%
Hospitality	50%	20%
Maintenance of accommodation like guest houses	50%	20%
Conference	50%	20%
Employee welfare	50%	20%
Sales promotion, including publicity	50%	20%
Free or concessional tickets	Actual	Actual
Contribution to superannuation fund	Actual	Actual
Festival celebration	50%	50%
Gifts	50%	50%
Use of club facilities	50%	50%
Use of health clubs, sports and similar facilities	50%	50%
Conveyance, tour and travel, including foreign travel	20%	20%
Hotel, boarding and lodging	20%	20%
Repair, running (including fuel), maintenance of motorcars and depreciation thereon	20%	20%
Repair, running (including fuel), maintenance of aircraft and depreciation thereon	20%	20%
Tax of 30% will be levied on the value of the fringe benefit calculated at the above rates

For women and senior citizens

Tax exemption limit for women enhanced by another Rs 10,000 to Rs 135,000. Now, women earning Rs 1.35 lakh-1.50 lakh would be required to pay 10 per cent income tax while those with an annual taxable income of Rs 1.5 lakh-2.5 lakh would have to pay tax at 20 per cent. Women earning above Rs 2.5 lakh would be liable to pay 30 per cent income tax.
Tax exemption limit for senior citizens increased to Rs 185,000 from Rs 150,000. For senior citizens, income between Rs 1.85-2.5 lakh will attract 20 per cent tax and beyond Rs 2,50,000, it would be 30 per cent.

Sectoral benefits

Hotels to calculate fringe benefit on hospitality at 5% instead of 20% for other sectors.

Construction companies liable to pay fringe benefit tax on 5% conveyance, tours and travel spending instead of 20% for the others.

Drug and software companies to pay concessional FBT on 5% of the spending on conveyance, tours and travel, use of hotel, boarding and lodging as against 20% for other sectors.

Companies engaged in carriage of goods and passengers by motor cars to pay FBT on 5% of the spending on repairs, maintenance, running (including fuel) and the depreciation thereon.

Airlines not required to pay FBT on repairs, maintenance, running (including fuel) and the depreciation thereon.

Cash Withdrawal Tax

No cash withdrawal tax on savings bank accounts

Over Rs 25,000 withdrawn by individuals or HUF in a day from current account to be subjected to 0.1 % tax; for others on Rs 1 lakh withdrawn during a day.

Tax to be levied on withdrawals from all banks instead of only scheduled banks proposed earlier.

Other tax changes

Income tax exemption limit for women raised to Rs 1.35 lakh for senior citizens to Rs 1.85 lakh.

Molasses: excise duty cut to Rs 750 per tonne.

No countervailing Customs duty on components for mobile phone manufacturing.

Optional excise duty on nylon tyres cut to 8 per cent.

All parts of computers, including laptops and central processing units, to be subjected to 7 per cent import duty.

Countervailing duty on nets for tuna fishing halved to 8 per cent.

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